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Commercial banks warned on bad debts
A source from the State Bank of Viet Nam says that outstanding loans of joint-stock commercial banks nationwide reached VND1,200 trillion (US$57.1 billion) by February, equivalent to 55 per cent of the banking sector's total. Of the figure, outstanding loans classified as substandard amounted to about VND22 trillion ($1 billion) or 1.76 per cent of the total outstanding loans.
On average, the banks' outstanding loans increased over 1.9 per cent each month while their substandard loans also rose by 0.16 per cent.
Experts said that the figure of joint-stock commercial banks' substandard loans were still lower compared with the banking sector's average rate (2.33 per cent).
They, however, are concerned that the banks'substandard debts increased in the first quarter of the year even when the central bank applied monetary tightening policies.
The Vietnam Economic Times quoted a State Bank official saying that in the current context, it was not surprising that the number of substandard loans had increased because production at many companies had become stagnant.
He said that enterprises' goods consumption had not recovered completely after the economic crisis, so their financial situation had become worse. This caused debts to increase.
Commercial banks' bad debts increased also because of poorly qualified bank staff. After the banks lent to companies, their credit staff did not monitor the use of these loans carefully verify whether they were being used properly or not. Consequently, the majority of the bank loans were pumped into infeasible high-risk projects, he said.
He also said that commercial banks' current figure for substandard debts was not accurate, saying the real figure could be more.
According to independent market watchdogs, the Credit Information Centre was designated to manage and provide information about credit activities, particularly at commercial banks. One of its main functions is to forecast credit risks.
However, it has not implemented this function yet because, with current regulations, the agency has limited authority and is only allowed to receive certain insufficient information.
The result is that the agency is unable to know which companies and individuals have bad debts with many credit organisations; thus, making the control of bad debts a difficult job. As a result, credit risks are concern at commercial banks.
Thien Ly
Vietnamnews
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